1998 (5) TMI 5

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....d jewellery and gold in the Huzur Jawahirkhana at Indore in 1949 and used by the Ruler of Indore on ceremonial occasions as in the past, were exempt under the provisions of section 5(1)(xiv) of the Wealth-tax Act. During the accounting year relating to the assessment year 1972-73, the assessee sold two items of heirloom jewellery for Rs. 13,80,001. The assessee claimed before the Tribunal that the heirloom jewellery constituted personal effects of the assessee within the meaning of section 2(14) of the Income-tax Act, 1961, and, therefore, the sale of this jewellery did not give rise to any taxable capital gains. This contention was negatived by the Tribunal. The Tribunal, however, framed the following question for reference before the H....

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....ry is also meant for the personal use of the assessee. It is, however, not meant for daily use but for use on ceremonial occasions. This does not deprive such jewellery of its character as jewellery meant for personal use. For example, clothes meant for use at weddings or formal occasions are not used daily. Yet they are stitched for personal use of the wearer. As such, they would form a part of his personal effects. Heirloom jewellery may be passed down from generation to generation. But it is nevertheless for the personal use of the owner. The High Court has rightly held that the frequency of use of the property must necessarily depend on the nature of the property. Merely because from the nature of the property, it can be used on ceremon....

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....ly and commonly used by the assessee. Jewellery is expressly included in the personal effects of an assessee as per section 2(14) as it stood at the relevant time. In the case of CIT v. Sitadevi N. Poddar [1984] 148 ITR 506 (to which one of us was a party) the Bombay High Court considered a case where the assessee sold certain silver utensils of the type which were used in the kitchen or in the dining room. The assessee contended that the silver articles were the personal effects of the assessee and hence were not capital assets within the definition of section 2(14) of the Income-tax Act, 1961. Kania J. (as he then was), distinguished the decision in the case of H. H. Maharaja Rana Hemant Singhji [1976] 103 ITR 61 (SC) and held that "pe....